Fortifying your supply chain stability through enterprise information management


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In today's information world, supply chain is essentially flow of information in addition to the traditional view of goods movement. This Whitepaper titled ‘Fortifying your Supply Chain Stability through Enterprise Information Management’ highlights on how information can be used by supply chain entities to guard their supply chain against potential risks.

The paper also briefs on how organization’s with different information maturity levels can adopt to EIM and leverage better insights to get their tough business questions answered.

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Fortifying your supply chain stability through enterprise information management

  1. 1. © Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability throughEnterprise Information ManagementWhitepaper
  2. 2. Author’s BioSatesh Kumar ( is a Business Intelligence Analyst working at Hexaware Technologies in BusinessIntelligence and Analytics Practice. His interest area primarily involves the application of BI technology to enhance businessprocesses and in defining different use cases for BI initiatives.WhitepaperFortifying Supply Chain Stability through Enterprise Information ManagementTable of ContentsExecutive SummaryNeed for Fortifying Supply Chains: An IntroductionSupply Chain: The Journey So FarSupply Chain Stability: A Success StorySupply Chain Risk: A Reality CheckImportance of KPIs for Supply Chain StabilityEnterprise Information Management (EIM) to Fortify Supply ChainReferences03030304040505072© Hexaware Technologies. All rights reserved. www.hexaware.com2© Hexaware Technologies. All rights reserved.
  3. 3. 3Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information Management1 Executive SummaryGlobal sourcing, which predominantly involves sourcing from low-costcountries, has created supply chains with opportunities andchallenges on par. With companies focusing on best practices suchas lean manufacturing and Just in Time (JIT) inventory, the lead-timefor supply has reduced significantly, increasing the need for greatersupply chain responsiveness. Many questions arise with theincreasing complexities in current supply chain systems. Forexample, how can organizations tackle supplier risk when the supplierbase spans from Singapore to Seattle or Bangalore to Buffalo? A2012 survey of chief supply chain officers found that 70 percentbelieve their organization needs to improve the existing processes oradd capabilities to improve their supplier risk management.This whitepaper briefly glances through the evolution of supply chainand briefs on the existing supply chains. Later, it analyzes the needfor stability in the existing supply chains and provides a framework forcompanies to assess the resilience of their supply chains. It alsofocuses on the importance of Key Performance Indicators (KPIs) inensuring supply chain stability. Finally, it explains how an EnterpriseInformation Management (EIM) would help organizations minimizesupply chain risks and maintain a robust supply chain in line with thecorporate strategy. For better focus, the discussion of this whitepaperis pertained to the supply-side of the chain.2 Need for Fortifying Supply Chains:An IntroductionIn the year 2000, the popularity of mobile phones had reached itszenith. Thus, the demand for cell phones increased manifold.At such a crucial juncture, a lightning bolt set fire to a Philipssemiconductor manufacturing plant in Mexico, which suppliedsemiconductor chips to Ericsson and Nokia. Although the fire wascontained immediately, the damage caused was magnanimous,resulting in shutting down of the plant for two months. However, theoutcomes of this incident were different for the two companies.For Ericsson, this plant was the sole supplier of semiconductor chips.As a result, their mobile handset production was halted and the lossesincurred in sales amounted to as huge as USD 400 million.On the other hand, Nokia immediately performed a damageassessment. Nokia also reached out to other companies for alternatesupplies and accordingly, reconfigured its handsets. As a result,Nokia maintained its dominant market position and did not sufferlosses as severe as Ericsson did.An important lesson learnt is that had both the companies beenequipped with an intelligent robust system that would predict theoccurrence of a probable supply disruption; such a disaster couldhave been averted. At the very least, the losses ensuing from such adisaster could have been minimized.This incident aptly demonstrates how a single event created amassive supply side disruption. This event had a huge impact as it hita supply chain that was not adequately resilient. Consider thefinancial crisis of 2008, which not only questioned the stability ofglobal financial systems, but also dramatically emphasized theinsecurity of existing supply chains. Thus, a robust framework tofortify existing supply chains is the need of the hour.Before delving into the specifics of a robust framework to fortifyexisting supply chains, let us understand the evolution of supplychains.3 Supply Chain:The Journey So FarThe early days of industrial revolution in the nineteenth century sawcompanies implement a rudimentary model of supply chain.Companies setup factories wherever resources were available andused local talent for production. They manufactured products andsold them predominantly in the local markets. All of this changed withthe World War II. After the war, governments lowered trade barriersand became open to the concept of globalization and companiesbecame vertically integrated. Vertical integration was theincorporation of much or all of the supply chain into one company. Atthis phase, the supply chain was stable but inflexible, predictable butslow.Globalization and economic liberalization of countries in the 20thcentury changed the supply chain archetype. Companies started tooptimize processes and reduce manufacturing costs with globalprocurement and production. Adopting industry best practices suchas Just-in-Time (JIT), lean manufacturing, outsourcing non-coreactivities, and investing in R&D helped them evolve. In addition,advances in e-commerce in the late 1990s and early 2000seradicated the barriers of time and distance.With globalization, companies face a new spectrum of challenges.These include political, economic, and social and technology (PEST)risks. These geographically specific PEST factors influence thelogistics and supply front.On the logistics front, flow of information, resources, and capital hasbecome complex. The supply front risks such as supplier failurenamely Environment Protection Agency (EPA) violations andOccupational Safety and Health Administration (OSHA) incidents,production disruption, and operational failures can have a ripple effecton the entire chain. In a survey conducted by Aberdeen Group in2012, 43% of 132 survey respondents indicated that incompleteinformation regarding corporate supplier relationships is a topbusiness pressure affecting supplier management and eventuallytheir supply chain.These issues indicate that although selecting the right supplier isimportant, tracking the various aspects of supply chain on a regularbasis is also critical.
  4. 4. 4Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information Management4 Supply Chain Stability:A Success StoryThere is no doubt that supply chains offer tremendous value tocompanies and boost their performance by effectively aiding inplanning, execution, design, monitoring, and control of businesses.Consider the following success story that aptly portrays the benefits ofa supply chain.“A global, diversified industrial manufacturing company with over $40billion in annual revenue implemented a supply risk managementsolution after investing significantly in lean, eProcurement, strategicsourcing, reverse auctions, and other related supply managementprograms. As a result of these programs, the company savedhundreds of millions of dollars from unit cost reduction efforts,increased inventory turns by 28%, and reduced the cost of non-qualityby 32%. Before embarking on its supply risk management formation,the company monitored less than 5% of its suppliers, but today, isactively monitoring 23,000 global suppliers for financial stability,quality and delivery, debarment, suits, EPA and OSHA compliance,and natural disasters.” Jim Lawton vice president and generalmanager, Open Ratings, a D&B Company.Nevertheless, the fact remains that instability in supply chain leads todisruption causing huge monetary losses. This instability could beattributed to a wide range of factors. Before a major disaster ordisruption strikes, some small events take place. These events areoften ignored. The opening story on Ericsson and Nokiademonstrated culmination of a series of events leading to supplychain disruption.These events merely provide an outline of the risks and uncertaintiesfaced by the global supply chains. For example, a change in political,economic or environmental factors in one part of the globe can disruptthe operations in a factory situated miles away. Simply consider thecase of the recent Japanese earthquake; it severely affectedelectronics production worldwide and led to prolonged businessdisruptions for the automotive industry. This is why companies todayare fraught with the need for stability in supply chain.5 Supply Chain Risk:A Reality CheckAlthough the supply chain has undergone transformations foroperational efficiencies, infiltrations of a multitude of factors challengeits stability. Few high-level supply chain risks are:• Supplies not reaching on time due to supplier failure• Issues in transit route• Unfavorable environmental factorsFor efficient supply chain operations, one needs to have informationabout the different facets of the chain such as location, production,inventory, and transportation. The absence of certain aspects ofsupplier data and processing may lead to supply chain disruption.Few of them are described below:1. Do you have information on all aspects of your supplier? –Data AttributesEvaluating a supplier and selecting the best must be done in amanner that best fits the strategic goals of the company. Awardingcontracts based only on cost and time will not sustain in the end.According to W Edwards Deming, a quality guru, "Do not awardbusiness based on price tag alone". Information visibility with respectto price and other generic details (such as supplier name, address,product portfolio, contact) must be combined with supplier’s financialstability, on-boarding status, R&D initiatives, transit routes and legalaspects among others to get a 360o view of the supplier.2. What is the source of supplier information? – Data SourcesAfter identifying the types of information to be tracked, the next step isidentifying the source of information. This could be available inseveral disparate systems within the organization that contain pasttransactions. However, in today’s dynamic economic scenario thisinformation alone would not suffice. A complete portfolio of supplierinformation (from internet, social media) that could track theday-to-day supplier actions and product rates is imperative to handlesupply uncertainties.3. What are your supply risk mitigation plans? –Multi-dimensional view of supplierBest practices help in improving process efficiency, but also increasethe supplier risk. For example, best practices such as One SourceOne Supplier, Just-in-Time inventory, lean manufacturing lead tosignificant cost savings, increased throughput, and reducedlead-time. However, they also increase the vulnerability of the supplychain as they focus on strict timelines and increased dependency onsuppliers. With the volatile economic scenario forcing global and localsuppliers to shut shops, companies must have systems that facilitateanalysis and rate the suppliers taking into account the risks,probability of their occurrence and their impact.4. Do you have a hold on your maverick spend? - ActionAccording to Accentures study on "Procurement to PaymentProcesses," which surveyed and interviewed 50 large companies onprocurement practices, maverick spend accounts for as much as 32percent of overall buying of the company.An unexpected failure from the preferred supplier may hamper anorganizations production process. As a result, companies procuresupplies in an ad-hoc manner leading to off-the-track purchasing. Thisis due to the absence of proper supplier tracking mechanisms.In such cases, merely gathering data is insufficient. Converting thedata into right actions is the key differentiator.
  5. 5. 5Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information Management6 Importance of KPIs for Supply Chain StabilityThere are risks associated with every facet of business, and supplychain risk is one of them. Key Performance Indicators (KPIs),methodologies, and processes can mitigate these risks.What gets measured gets improved. In the current scenario, supplychain is not just flow of goods but also flow of information. Let usexplore the different areas in supply chain and the KPIs associatedwith these areas by referring to Supply Chain Operations Reference(SCOR) Model. SCOR is a reference model developed by SupplyChain Council, an independent NPO for supply chain organizationsand professionals.In addition to the above mentioned KPIs that are calculatedpredominantly from the internal systems, intelligence can also begarnered from external sources such as social media news feeds etc.available via the internet. These KPIs when defined and trackedappropriately can aid an organization by insulating its supply chainfrom major supply chain disruptions.7 Enterprise Information Management (EIM) to FortifySupply ChainThe KPIs defined in the above section aid in continuous monitoring ofsupply chain processes and provide risk mitigation options by clearlydefining remedial measures. Nevertheless, it is important to have arobust information infrastructure in order to deliver the KPIs. This iswhere Enterprise Information Management (EIM) is indispensable.An indicative road map that would help companies with differentinformation maturity levels to adapt to the EIM platform is illustratedbelow.Level 1 OrganizationsOrganizations at Level 1 face data quality issues due to multipleversions being maintained on excel or disparate systems. Questionsthat these organizations need to address include:1. Am I losing cost benefits of large-scale procurements?2. Are multiple channels of my business viewing the same productversions? (up to product parameters)3. I am planning for a supplier consolidation program, but who aremy critical suppliers?EIM’s Master Data Management – MDM (Supplier and Product DataManagement) component provides end-to-end data managementcapabilities, comprising of five key parameters:• Strategy – To understand the long-term and short term objectives• People – Establish a data governance organization and invokeorganization level commitment• Data – Understand the data landscape and build a cleansingmodel• Process – Evaluate the current model and redefine asappropriate• Technology – Develop a technology road map to implement theredefined processMDM initiative aids in creation of a ‘single version of truth’ that lays thefoundation for data governance practice resulting in data quality of thehighest standards.SCOR Model - Stage ofSupply ChainStrategyPlanSourceMakeDeliver• Supply chain cycle time• New product launched count• COGS as % of revenue• SG&A as % of revenue• Indirect supply chain costs as % of revenue• # direct supply chain FTEs• Span of control• New product development cycle time• New product revenue rate• Cash-to-cash cycle time• Return on working capital• Return on supply chain• Perfect order fulfillment• Case fill rate• Indirect supply chain costs: plan % of revenue• Forecast accuracy• Inventory accuracy• Inventory days (raw materials, work in process,finished goods)• Inventory carrying cost• Inventory write-offs as a % of revenue• Indirect supply chain costs: source % of Revenue• Direct materials spend $/FTE• Direct materials spend on contract• Direct materials spend with single/sole source• Direct materials received on time• Direct materials LCC spend• Indirect materials spend sourced by procurement• Indirect materials spend $/FTE• Indirect materials spend on contract• Direct materials supplier perform• Total make costs: % of revenue• Direct labor % of revenue• Indirect supply chain costs make — % of revenue• Overall equipment efficiency• Capacity utilization• Manufacturing outsource rate• Direct wage rate• Direct make FTEs• Return cycle time• Customer returns• Indirect supply chain costs: deliver % of revenue• Order management costs % of revenue• Distribution operations costs % of revenue• Transportation cost as % of revenue• Returns cost as % of revenueKPIsCourtesy: Deloitte Supply Chain Book of Metrics
  6. 6. 6Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information ManagementLevel 2 OrganizationsOrganizations at level 2 face issues on integrating both structured andunstructured data from various disparate traditional sources such asERP, legacy systems, excels etc. and non-traditional sources such asemail, social media, and internet feeds. Questions that theseorganizations need to address include:• The maverick spend of my organization is rising, details of whichare in the email. How do I fetch this data?• Are any of my suppliers likely to become delinquent?• Am I paying the right price for the product? I want to analyzegeographically specific commodity pricing on a daily basis.EIM’s Enterprise Data Integration (EDI) and Big Data componentshelp organizations to acquire, manage, and act upon the intelligencegarnered by processing data both within enterprise walls and externalunstructured data. Supply and demand planning can have valuableinsights based on data (Big) collected from web clickstreams,Facebook likes, Twitter feeds, news articles, Dun & Bradstreet data,GPS, trailer/pallet tags, electronic on-board recorder (EOBRS).On bringing these external data into enterprise boundaries andapplying appropriate data, mining techniques and predictive analyticsupon this data would deliver insights that were previously unavailable.Level 3 OrganizationsOrganizations at level 3 face issues in converting/modeling the datafrom transaction systems into a form (view) that would aid them inanalytical processing. Questions that these organizations need toaddress include:• I have data in my procurement system, how do I deriveintelligence out of it?• What is to be measured and with reference to what aspect ofdata?• What parameters do I need to consider to rate my supplier base?Upon getting the required data, the next critical activity is an accuratedata modeling process that would aid in linking the measurable data(Fact) with the perspectives (dimensions) for end-user analysis. Thedata model at a high level should have different subject areas e.g.vendor, warehouse and logistics analytics with reports and KPIs forthat subject area. Interactive workshops that elucidate end-userneeds provide an important input to the data modeling process.Level 4 OrganizationsOrganizations at level 4 face issues in getting the rightrepresentations of data through new delivery channels and gapbetween analytics and action. Questions that these organizationsneed to address include:• How can I analyze Business Intelligence (BI) reports on my smartphone or tablet?• Can there be a new yet meaningful way of BI representations?• How can I link data insights into action?The latest release of leading BI products (with Next Gen BI offerings)enhances the user experience in terms of information delivery. Few ofthese enhancements include:• Data representation on mobile devices• Disconnected analytics• Integrating BI with operational systems workflows (e.g. When a BIreport indicates delay in shipments from suppliers, the systemprovides an option to invoke an email to the supplier or choose analternate supplier)• Improved information representation such as geospatialintegrationHaving seen through the key EIM components and their applicabilityto organizations with different information maturity levels, let us matchthe supply chain risk elements (Section 5) with the EIM components:As seen in this section, a well-strategized EIM platform will aid ingarnering relevant (structured and unstructured) data, putting theinformation pieces together and representing data in an easilyunderstandable manner. An effective collaboration between businessand IT will help organizations mitigate the risks associated with supplychain.Do you have information on allaspects of your supplier andproducts? – Data AttributesWhat are your supply riskmitigation plans? –Multi-dimensional view ofsupplierA well-defined data model withkey measures (facts),dimensions and KPIs will helpin determining what are thedifferent data elements to becaptured for analyticsWhat is the source ofsupplier/product information? –Data SourcesA well-structured dataintegration and big datapractice will aid in sourcing theright information, applyinglogical transformations andstoring the data in an easilyconsumable mannerDo you have a hold on yourmaverick spend? – ActionA well-strategized Next GenBI tool and technology thatlinks analytics with action(OLTP systems) e.g.:triggering a mail/SMS on theoccurrence of a thresholdbreachRisk EIM Component
  7. 7. 7Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information Management8 References1.$FILE/The_evolving_world_of_supplier_risk.pdf2.
  8. 8. 8Whitepaper© Hexaware Technologies. All rights reserved. www.hexaware.comFortifying Supply Chain Stability through Enterprise Information ManagementDisclaimerContents of this whitepaper are the exclusive property of Hexaware Technologies and may not be reproduced in any form without the prior written consent of Hexaware Technologies.To learn more, visit http://www.hexaware.com1095 Cranbury South River Road, Suite 10, Jamesburg, NJ 08831. Main: 609-409-6950 | Fax: 609-409-6910